A recent Cato blog examined the effects of Utah’s “Housing First” policy, which aims to provide the chronically homeless with permanent housing without requiring treatment for mental health issues or substance use disorder. The Biden administration recently unveiled a new federal plan to address homelessness that rests on this philosophy, so the outcomes in Housing First states are worth considering. Unfortunately, in Utah, the original “Housing First” state, data indicates that chronic homelessness and overall homelessness have grown significantly two decades after policy implementation.

California is another state that put Housing First at the center of its homeless policy response, and the state provides another case study. California began its foray into Housing First policy when San Francisco implemented a policy based on Housing First principles called “Care not Cash.” Then-County Supervisor Gavin Newsom pushed the policy, which diverted funding away from cash benefits for the homeless and towards building permanent housing and shelters.

Then, in 2016, California adopted Housing First statewide. As a result, California now requires any state-funded homeless program to abide by the principles of Housing First, including allowing tenants to stay housed regardless of substance use. Governor Newsom revamped these efforts in 2020 with the introduction of Project Homekey, a program that aims to convert existing buildings into permanent supportive housing.

These efforts have proven expensive, and California has spent $3.7 billion on the Homekey program since announcing it in 2020. Cities are spending millions of their own money as well: San Diego spent over $62 million on permanent supportive housing between 2010 and 2018, significantly more than the $30 million it spent in that same period on homeless shelters.

However, despite the significant funding commitment, California’s chronically homeless and homeless population continues to grow. Chronic homelessness in California fell by 51 percent between 2005 and 2016 (see Figure 1), but the trend reversed after 2016, the year Housing First was implemented statewide. Between 2016 and 2022, chronic homelessness increased by 93 percent, reaching levels not seen since 2005.

A similar trend can be seen among the overall homeless population (Figure 2). Overall homeless numbers rose following policy adoption, and according to a 2022 report from the U.S. Department of Housing and Urban Development, 30 percent of the nation’s homeless population now live in California, which also has the highest homelessness rate in the country (44 per 10,000 people).

While it is possible that California’s policy still reduced homeless counts over a hypothetical counterfactual without the policy, it is clear that the policy is not delivering on lofty promises to end homelessness or even reduce homeless numbers from the baseline.

Results in San Francisco—where Housing First-based policies were in place more than a decade before they were adopted statewide—are also disappointing. While the number of chronically homeless individuals varies somewhat irregularly after 2005, the chronically homeless population stays elevated: San Francisco was only able to reduce numbers below 2008 levels once, in 2015 (Figure 3). Overall, chronic homelessness increased 53 percent between 2005 and 2022.

California and San Francisco’s Housing First initiatives prioritize the chronically homeless, a group that constitutes a subset of the broader homeless population. However, it is also worth considering changes in the overall homeless population. Figure 4 shows that the total number of homeless individuals rose steadily after implementing Care Not Cash, San Francisco’s Housing First policy (Figure 4). Specifically, between 2005 and 2022, overall homelessness increased 43 percent.

Similar to Utah, the cost of housing is one major factor contributing to the disappointing results of California’s Housing First policy. California has the second highest average home prices in the country behind Hawaii, with an average cost of $468 per square foot. This means that even building permanent supportive housing is expensive. For example, in Los Angeles County, a 20-room hotel was purchased and renovated at a cost of $275,000 per unit and a 39-room motel was renovated at a cost of $330,000 per unit. Apparently, it costs the state tens of millions of dollars to produce less than a hundred permanent supportive housing units.

Unfortunately, it appears that project costs are increasing. For example, an audit of a project in Los Angeles found that 14 percent of housing units for the homeless cost more than $700,000 to build. Moreover, last year, the Corporation for Supportive Housing estimated that California needs to build 112,527 units at a total cost of $67.9 billion, or $603,410 per unit, to end homelessness. Subsidizing operating costs and rents for these units costs an additional $22 billion over 12 years.

These realities help explain why California’s Housing First efforts are failing while other areas, such as Houston, are seeing more success. Ned Resnikoff, the policy director at California YIMBY, put it in perspective; “The Housing First model can only work when homeless services agencies actually have enough units to meet their clients’ needs. Largely because of the difference in housing costs, San Francisco spends roughly three times as much as Houston to house a single homeless individual.”

In addition to the high cost of building housing in a housing supply constrained state, another reported issue inherent to California’s Housing First approach is its strict prohibition of homeless shelters and permanent supportive housing programs that require sobriety. Under state law, a housing program receiving state funding cannot evict a tenant for drug or alcohol use. This is a staple of the Housing First philosophy, but it can negatively affect adults with substance use disorder who are trying to become drug-free for various reasons, including so that they can comply with court orders and keep or regain custody of their children.

Julie Hirota, the CEO of a center for women and children experiencing homelessness in Sacramento, says that her program is ineligible for state funds because it prohibits the use of drugs or alcohol, a rule shelter staff believe is needed to help those who are trying to become drug-free. In 2022, two Democratic legislators introduced a bill in the California Legislature that would have allowed an exception to this restriction for programs like Julie’s that house tenants who must remain free from drugs or alcohol in order to be reunified with their children. However, the measure was not taken up by the Assembly.

California’s experience demonstrates the need for policymakers to allow for a varied approach to homeless policy, understanding that a one-size-fits-all policy will not work for every demographic or every location. Like Utah, California’s experience reveals how difficult and expensive it can be to produce enough housing to reduce homelessness using a Housing First approach, especially when housing prices are very high.

Since the average home price in the US is almost twice as high as it was a decade ago, a national Housing First approach would likely come with an enormous price tag. All considering, and despite the Biden Administration’s recent recommendations, California and Utah’s experiences suggest that now is not the right time to adopt a Housing First strategy nationally.